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OPINION AND ANALYSIS | 29-02-2020 11:33

Growth put on the backburner

When in opposition, Peronists and others with broadly similar points of view like to pretend that the country is several times richer than the available data would suggest.

As well as making it easy for them to blame widespread poverty, crime, inadequate public services, the many defects of a once-admired educational system – which, to judge by the results, is now among the worst in Latin America – and much else on their adversaries whom they accuse of letting themselves be browbeaten by fiscal purists obsessed with nasty things like numbers, they assume it saves them from having to tell us exactly what, should there be less money available than they expected, they would do if they were to reach power.

During the election campaign, Peronist spokespeople made it clear they thought that kicking out Mauricio Macri and his team would restore economic “normality” and allow the country to boom. As far as such people were concerned, removing from office the Scrooge-like individuals who went on and on about the inflationary effects of overspending and the alleged need to keep financial variables in line would be more than enough to get the economy moving again. About half the electorate agreed.

As much of the population – including men and women who voted for Macri because they disliked Cristina Fernández de Kirchner and distrusted her nominee, Alberto Fernández – is fond of the notion that Argentina is richer than her rulers admit so there really is plenty of money around that should be put to good use, many assumed that, once in power, the new government would immediately start ladling out large amounts of cash as it promised it would before the last votes were counted.

Unluckily for them, and for Alberto, soon after the new government took over its members realised that the cupboard was bare and was likely to say that way for some time to come. For a good Peronist who had made much of his determination to solve Argentina’s many social problems by going on a spending spree, it must have been a disconcerting experience.

Instead of starting his term in office by increasing all pensions by 20 percent and stuffing people’s pockets with crisp banknotes so they could consume like mad as he had said he would, Alberto found himself in much the same position as did his predecessor Macri after the economy went belly-up in April 2018, when a run on the peso put an end to his “gradualist” programme. Much as he dislikes the idea, the way things are turning out he will have to cut government spending to the bone, and then some.

The president is still reluctant to face up to this unpleasant fact. However, although prolonged wrangling over the foreign debt gave him what he thought was a good reason to delay making public just how he proposes to manage the economy in the coming months and years, what he has done so far does not encourage optimism. After making “fighting poverty” with handouts of one kind or another an absolute priority, he has spent his first 80-odd days in power trying to gouge more money out of people involved in the rapidly shrinking productive bits of the economy. Instead of going for growth as he said he would, he is throwing up more barriers in its path.

Perhaps “the plan” Alberto and his Economy Minister, Martín Guzmán, swear they have under wraps until the time comes to reveal it will astonish the world by showing that it is perfectly possible to make the economy grow mightily by increasing social welfare spending while squeezing farmers, businesses big and small and many other people until the pips squeak, but few would bet on it. Rightly or wrongly, many both here and abroad think the policies apparently favoured by the president and his key advisors are suicidal and that, if applied too vigorously, they are bound to put an already sick economy on its deathbed.

For well over half a century, most Argentine politicians – who have good personal reasons to like the way things are – have kidded themselves that the problems the country faces are not that serious because they themselves have managed to do quite well. This presumably is one reason why they have staunchly refused to undertake the “structural reforms” that economists derided as “orthodox” or “neoliberal” say are necessary.

The political pros know that as well as costing them votes, such reforms would require them to take on powerful trade unions whose bosses are experts in organising massive street protests, as well as business lobbies dominated by protectionists who are more interested in keeping on good terms with the government of the day than in producing articles they could profitably sell on the international market.

Throughout the years, the political establishment’s efforts to keep meaningful change at bay have been remarkably successful. By doing so, they helped ensure that output remained stagnant for the last 10 years. If Alberto’s government sticks to its guns, the next 10 years will be equally depressing and the likelihood of an eventual successor putting an end to the downward spiral will get smaller.

While in some countries the evident failure of an approach long backed by most Peronists would have cost those supporting them dearly in the polling-booths, here the impoverishment of many millions of people has had the opposite effect. Instead of discrediting the Peronist movement in the eyes of the poor, it has helped it conserve its popularity.

People who fear they will be unable to feed themselves and their children next week cannot be expected to pay much attention to those who warn them that, in the long run, the piein-the-sky policies they find appealing will make them even worse-off. What is more, politicians are well aware that, as last October’s presidential elections reminded us, the povertystricken millions who live as best they can in the rundown townships of Greater Buenos Aires get to decide who rules Argentina. For understandable reasons, most of them want benefits now, not long-term schemes which, if they worked, would bear fruit in years to come. This gives a big advantage to candidates like Alberto and Cristina, who make a virtue of short-sightedness and are more than happy to make promises they know they will be unable to fulfil.

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James Neilson

James Neilson

Former editor of the Buenos Aires Herald (1979-1986).

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